A

PROJECT

ON

ONLINE TRADING AND DE-MATERLISATION

CONDUCTED AT

ITI FINANCIAL SERVICES LTD

BY

DOKIPARTHI SANTHOSH KUMAR

ROLL.NO: 09JE1E0046

Submitted in partial fulfillment of award of Degree of

MASTER OF BUSINESS ADMINISTRATION

ESWAR COLLEGE OF ENGINEERING,

KESANUPALLI (V), NARSARAOPET (M),

GUNTUR (DT)

1
 CERTIFICATE

This is to certify that the project entitled “INVESTMENT IN EQUITIES WITH

REFERENCE TO ITI FINANCIAL SERVICES LTD” submitted to the JNTU
KAKINADA UNVERSITY in partial fulfillment for the award of degree of Master of
Business Administration has been carried out by Mr. BADIRI SAI BABU Hall-Ticket
Number 09KP1E0005, who is a bonafide student of NRI INSTITUTE OF TECHNOLOGY
(NRIIT), VISADALA ROAD, GUNTUR for the academic year 2009-11.

HEAD PRINCIPAL

2
 CERTIFICATE
This is to certify that the project report titled “INVESTMENT IN EQUITIES WITH
REFERENCE TO ITI FINANCIAL SERVICES LTD” submitted in partial fulfillment for
the award of MBA Programme of Department of Business Management, JNTU KAKINADA
UNVERSITY, KAKINADA, was carried out by Mr. BADIRI SAI BABU, under my
guidance. This has not been submitted to any other university or institution for the award of
any degree / diploma / certificate.

Name and Address of the Guide Signature of the Guide

3
 DECLARATION
I hereby declare that this project report titled “INVESTMENT IN EQUITIES
WITH REFERENCE TO NRI INSTITUTE OF TECHNOLOGIES”
submitted by me to the Department of Business Management, JNTU
KAKINADA UNVERSITY, KAKINADA, is a bonafide work undertaken by
me and it is not submitted to any other university or institution for the award of
any degree / diploma / certificate or published any time before.

Place:
Date:

(BADIRI SAI BABU)

4
 ACKNOWLEDGEMENT

I express my gratitude to Mr. Shiva Kumar for giving me this opportunity to carry
out the project work on “INVESTMENT IN EQUITIES” in Ventura Securities.

I also express my sincere thanks to the Staff Of ITI FINANCIAL SERVICES LTD
who were of ready help in answering my various quires related to the project work.

It is with great pleasure that I Express my gratitude to Mr.DEEPU, under whose

inspiring guidance and advice this study has been carried out.

(BADIRI SAI BABU)

5
 TABLE OF CONTENTS

TOPIC
INTRODUCTION TO THE STUDY
NEED FOR THE STUDY
LITERATURE REVIEW
COMPANY PROFILE
DATA ANALYSIS
SUMMARY
FINDINGS
SUGGESTIONS
CONCLUSIONS
BIBILIOGRAPHY

INTRODUCTION

6
 Online trading symbolizes the perfect synergy between technology and
the mind numbering intricacies of stock markets in bringing about a paradigm shift in the
way financial markets operate in recent times. It facilitates faster and efficient transaction
of stocks and share through the internet, while keeping the basic principles of share
trading intact. In addition to replication the traditional stock trading business on the net,
online trading has led to the mushrooming of a plethora of peripheral business units in the
form of e-broking firms, web-advisors, e-consultants, etc.

Across the globe, bulk of the trading is being done through the net, provding
online trading to be an instant success among the investors and intermediaries. It also
renders a harmonic integration of investors, e-broking firms, banks, stock exchanges and
the depositories with the possibility of a ‘single window system’, in the near future. Such
a system will enable the execution of trade at‘t+o’, rather then the existing ‘T+2’ time
cycle. The emergence of high-tech mechanisms like straight. Through processing (STP),
Continuous Linking System (CLS) and Direct Access Trading (DAT) platform is sure to
make the dream of an investor, getting his orders executed with the click of a mouse in
20-30 seconds, a reality.

In the last decade, online trading has spread far and wide across the globe, with
varying degrees of adoption in terms of percentage of trade carried out online, economic
giants like the US and Japan where online trading had its origin, are yet to completely
transform the stock business through the net, while, India and china, despise their inherent
infrastructural limitations are fast progressing towards a scenario where a big chunk of
the transactions would be online, though online trading has made cross border trading

much easier, the tendency of the investors to trade in their own currencies and
securities, limits the spread and success of it.

However, European investors are best placed in cross border online trading given
their historical and geographical associations with other nations, and also due to the single
trading currency, the euro.

The emergence and spiraling growth of online trading have thrown up a lot of
challenges and opportunities for all major elements, viz, investors, brokers and internet

7
portals, of the trading mechanism. In the current scenario, online trading portals are
slowly replacing the physical presence of traditional brokers and sub brokers. The role of
these brokers, henceforth, could be restricted to online counseling and web-advising to
the investors. The online portals or the e-broking firms, as they are know, are connected
to the stock exchanges 24 hours a day to execute the orders placed by the investors. They
also provide the vital market information technical analysis and various other innovative
services to the investors. It is learnt that, at present, the market of e-broking is little over-
crowded and hence over-brokered, making it hugely difficult for the new entrants to
negotiate the entry barriers. However, when the markets move in upward trends and trade
volume increases, it is expected that these firms will get enough to share.

The presence of a wide array of e-broking firms has drastically cut down the
brokerage cost for the investors. The cost effectiveness and the fascination of online
trading are enticing millions of retail traders to the stock markets. These investors, armed
with the variety of market information and intelligence provided by online portals and
consultancies, directly involve in the trade just by sitting in any corner of the world. The
introduction of futures and options trading in the recent past has made online trading
more attractive. But this situation could be a double edged sword. All these market

information and the easy trading opportunities have created an illusionary

knowledge and over confidence among the investors, leaving them like a bunch of sitting
ducks on the highway of market fluctuations and uncertainties.

8
 Online trading has also given way to a new breed of investors known as ‘Day
Traders’ who gamble in the market, trying to make money out of the minute-by-minute
fluctuations in share prices. To their dismay most of them end up bankrupt and simply
disappear. These day traders are also responsible for most of the day to day price
variations that are beyond the rational expectations prevailing in the market. Another
important worrying factor of online trading is the safety and regulation issues of stock
business. It is very difficult to have a foolproof system of trading, considering that the
entire business is done on a seamless and a very fluid platform. It needs the evolution of a

blend of well-tested technology and trading mechanism to make online trading universal
and complete. All said and done, investors and people involved in stock trading should
keep in mind that the stock market is not a Mexican casino to gamble, but a means of
capital mobilization and equitable distribution in achieving the ends of economic growth.

TRADING PROCEDURE BEFORE ON-LINE

THE TRADING RING:

Trading on stock exchanges is officially done in the ring for a few hours from 11.00
A.M to 2.30P.M. Trading before or after official hour is called KERB TRADING. In the
trading ring space is provided for specified and non-specified sections. The members of their
authorized assistants have to wear a badge or carries with them identify cards given by the
exchange to enter the trading ring. The carry a Sauda block book or confirmation memos duly
authorized by exchange and carry a pen with them. The stock exchanges operations at floor
level are highly technical in nature. Non-members are not permitted to enter into stock
market. Hence, various stages have to be completed in executing a transaction at a stock
exchange. The steps involved in the methods of trading have been given below:

9
 CHOICE OF BROKER:
The prospective investor who wants to buy shares or the investor who wants to sell
his shares cannot enter into hall of the exchange and transact business. They have to act
through only member brokers. They can also appoint their bankers for this purpose. Since,
bankers can become members of stock exchange as per the present regulations.

So, the first task in transacting business on stock exchanges is to choose a broker of repute or
banker. Such people’s can ensure prompt and quick execution of a transaction at the possible
price.

At present there are 4500 authorized brokers in ISE.

 PLACEMENT OF ORDER:
The next step in planning of order for the purchase or sale of Securities with the
broker. The order is usually by telegram, telephone, letter, fax etc., or in person. To avoid
delay it is placed generally over the phone. The orders may take any one of the forms such as
at best order, limit order, immediate or cancel order, discretionary order, limited discretionary
order, open order and stop loss order.

 PLACING ORDER WITH THE BROKER:

The next step is placing an order for the purchase/sale of securities with the broker.
The order is usually placed over telephone, fax. It can also take the form of telegram or letter
or in person. The order placed may be any of the following varieties (largely classified on the
basis of price limits that it imposes.).

INTRODUCTION TO ONLINE TRADING

Gone are the days of trading on the floor. Technology has changed the landscape of
the stock markets. The look of the stock exchanges has undergone metamorphic changes in
the recent years. Prior to online trading, regional stock exchange was playing a very
important role in capital markets, as they were local investors. Regional SE, which was
unable to interact with other SE’s started developing this own screen based trading and
10
connecting to other scrip’s which were not available with them. This also helped in accessing
the quotes and other market information from other stock exchange, which proved vital in the
functioning of the system as a whole.

The trading network is depicted in given below NSE has main computer which is
connected through Very Small Aperture Terminal (VSAT) installed at its office. The main
computer runs on a fault tolerant STRATUS mainframe computer at the Exchange. Brokers
have terminals (identified as the PCs in the given picture) installed at their premises, which
are connected through VSATs/ leased lines/modems. An investor informs a broker to place
an order on his behalf. The broker enters the order through his PC, which runs under
Windows NT and sends signal to the satellite via VSAT/leased line/modem. The signal is
directed to mainframe computer at NSE via VSAT at NSE’s office. A message relating to the
order activity is broadcast to the respective member. The order confirmation message is
immediately displayed on the PC of the broker. This order matches with the existing passive
order (S) otherwise it waits for the active orders to enter the system. On order matching, a
message is broadcast to the respective member.

11
 TRADING NETWORK

HUB
ANTENNA
SATELITE

NSE MAINFRAME BROKERS PREMISES

12
 OBJECTIVES

To study the conceptual framework of online trading and de-materlisation.

• To study about online trading procedure followed in ITI Financial Services Limited.
• To study the advantages of online trading system over manual system.
• To study how online trading system helps in improving market transperancy .
• To study how online trading system helps in smooth market operaton while retaining
the flexibility of conventional trading practices.
• To compare the transaction changes of similar firms. To study the entire mechanism
of trading online and dematerialization.
• To study various benefits of depositories.
• To study the concept of dematerialization of shares that is procedure, Demat a/c, transfer
of securities and trading and settlement of Demat securities.
• To study the services provided by NSDL and CSDL.
• To study the procedure of online trading of Demat securities.

13
 NEED OF THE STUDY

In outcry the broker has to buy or sell securities for which he has received the
orders .for this, the broker or his authorized representatives goes to the stock exchange.
Basically the broker shouts while buying or selling the securities. The floor of the stock
exchange is divided in to a number of market also ‘post pit’ or wing based on particular
securities dealt there.

In the post pit or wing, the broker using ‘open outcry’ method makes an offer or
bid price. For making the necessary bargain, he codes his purchase or sales price, also
known as offer or bid price. The dealer, to whom the price is quoted, quotes his own price
quotation of the dealer suits the broker, he may lose the bargain. If he is not satisfied with
the quote price he may turn to some other dealer .On the close of the bargain, the dealer
sell as well as the broker makes a brief notes of the particulars of the deal. Such notes are
made on some pad and on it the number of shares, the price agreed upon, the name of the
party, what membership number etc., are noted.

The disadvantages of outcry system are it lack transparency, the scope of

manipulation, Inaudibility and also speculation and malpractice is more, in order to
overcome the above problems, online trading came in to existence. Hence the need to
study the advantages of online trading system and its importance in making the market
operations and smooth while retaining the flexibility of conventional trading practices.

14
 Scope of the study

The scope of the project is to study and know about Online Trading and Clearing &
Settlements dealt in ITI FINANCIAL SERVICES LTD. By studying the Online Trading and
Clearing & Settlements, a clear option of dealing in stock exchange is been understood.
Unlike olden days the concept of trading manually is been replaced for fast interaction of
shares of shareholder. By this we can access anywhere and know the present dealings in
shares.

The scope of the study is limited to ON-LINE trading mechanism of stock broking firm
in particular ITI Financial Services Limited, Secundrabad.

15
 IMPORTANCE OF THE STUDY

Stock exchange is an integral part of capital market it is the most perfect

type market for securities wether govt or semi govt bodies or other public bodies also for
shares and debentures issued by joint stock enterprises.

Stock exchange provides liquidity to the listed company they give quotations
to listed companies and help in trading and raising funds from the market. Stock
exchange provides ready marketability and unequalled of ownership of stocks, shares and
securities.
Stock market in India is more than a centuary old and has been functioning
effectively through the medium of recognized stock exchange the stock market which is
an integral part of the capital market has been major impact on the functioning of the
economy. In turn, the agriculture industries growth and performance of corporate sector
in particular , reflecting the fundamentals in the economy would be influenced the tone of
capital and stock markets, and since the capital market is playing major role in Indian
economy from the past several years. There is need to study the capital market in India.

The present scenario to complete and survive the regional stock exchange
would require sound infrastructure and trading system as per international standards,
due to the following reasons.

With the introduction of online trading liquidity will improve considerably

which is very much essential for attracting small companies to the exchange. Before the
introduction of the online trading, Outcry prevalent. Here the member or the broker

Would stand at specifies spot in trading hall. He is required to shut out the
name of the company, number of shares he has and the price of the shares ultimately the
deal would be made between the buyer and seller and transfer of the shares take place.
With the use of the online trading surveillance be came easy as there is very less scope for
speculation. The invester is provided with best offer. Also transparency is observed in
transactions
16
RESEARCH AND METHODOLOGY

Data source: -

The data source utilized to under taker the project is both primary and secondary data.

Primary data: -

The data is collected by personal interaction with autherised members of ITI Financial
Services Limited.

Secondary data: -

The secondary data is collected from various sources like the brochures and material
provided by ITI Finaicial Services Limited.

17
 LIMITATIONS OF THE STUDY

 The study is confined to online trading procedure only.

 Problems of listing are not covered due to limited time and to keep the study in
manageable limits
 The data is collected from the primary and secondary sources and thus is subject to
slight variation than what the study includes in reality
 The study was restricted in Hyderabad.
 The observations drawn are of past and present years only.
 Detailed study on the topic was not possible due to limited size of the project.
 There was a constraint with regard to time allocation for the research study i.e. for a
period of two months.
 Data collection was strictly confined to secondary source of data. No primary data is
associated with the project.

18
 REVIEW OF LITERATURE

Online trading marks a watershed in the application of technology in conducting

trading business in stock markets. This book is divided into four sections. The first
section deals with fundamentals and framework, the second section focuses on the
implication of online trading the third section describes the implications for online
investors. The fourth section is about the technology advancements in online trading. The
first section on fundamentals and Framework deals with the evolution of online trading,
basic concepts, background and trading mechanisms involved. The opening article, “share
trading: Moving to the Net”, by Dr. T R Rajarajan traces the evolution of securities
trading from traditional system to trading through the internet. It discusses the trading
mechanism through the major components of online trading, viz, banking, depositories,
technology and other infrastructure.

Information technology has replaced the age-old share trading method with the
faster and more accurate online stock trading. The second article. “Online trading:
Trading @ the speed of light,” By Mayura jaiswal, deeepad vashist and Abhay Kumar,
traces the growth of online trading from the year 2000 using statistics on volume of
online trading from the year 2000 using statistics on volume of online trading, number of
e-broking firms, brokerages and demographic patterns. Online trading has dramatically
changed the way stock business has been conducted over the years. In the next article,
“online trading: Issues and concerns”, by Anup Bagchi, the author suggests that online
trading should balance a technology centric approach to transactions with the human
factor for a successful transition from traditional to online trading. In his interview, jade
smith (HSBC treasury and capital markets) discusses various aspects of online trading:
the types of transactions conducted online, different value propositions in the online
marketing and the future trends in e-trading.

19
 The process of payment and settlement is an issue of importance in online stock
trading. The sixth article, “ payments in India: The journey so far and the road ahead”, by
Vinod Madhavan looks at how the multiple payment systems have developed in India and
considers the need for technology and a legal framework to ensure that an electronically
linked payments and clearing system, including cheque truncation, can be implemented in
future. In the next article, ‘clearing & settlement system at NSDL’, the structure of a
clearing account is described along with the process of settling trade in markets.

EVOLUTION OF ONLINE TRADING:

Online trading had its origin in the US where the first E-trading of stocks began in
1983. Primarily used in the form of e-commerce to place and receive orders for
commodities; slowly it entered the financial markets as an alternative to the traditional
system. By the late 1990’s, most of the stock exchanges had been automated, and the
“open outcry” method of trading had been slowly done away with. Most stock exchanges
began to use computers to replace the market makers or the floor traders who execute the
trade on the floor.

With the emergence and growth of the internet, the floor trader’s started taking
computer orders from brokers and executed the trade. Subsequently, when the stock
exchanges used software technology to interconnect brokers, depositories and banks, the
internet order place by clients were firs route through the stock brokers’ computer
systems where the matching of orders took place and the trade was executed. This gradual
up scaling of technology has led to the rise in popularity and acceptance of online broking
as a major way of stock trading.

With the book in software technology, the online trading platform became faster
and faster with a lot of sophistication and increased security. Now the thrust is on making
the entire trading process completely seamless and risk free.
20
TRADING MECHANISM:

The mechanism in online trading Is the replication of trading of physical securities

through the internet in a much faster and convenient way. Basic principles and logic of
stock trading remain the same as before; only, the investors feel more empowered and are
served with plenty of information. The diagram 1 and 2 depict both selling and buying of
securities online.

There are primarily 5 components in any online trading mechanism.

1. Investor
2. broker/ E-broking firm
3. DP Accounts
4. Bank Account
5. The Exchange

The process of online trading is driven by a front-end software which the stock
exchange employs through satellite (like V-SAT) connections. This software technology
provides the necessary interface between the brokers, depositories and the banks. The
investor is required to trade through any of the approved brokers, and brokers of trading
members can only trade with the exchange.

The investor places the order with the broker and the broker gets the order executed
from the exchange. Each broker, who has to be a trading member, is connected to the
exchange through sophisticated software. In the same way, each investor has to trade only
through the broker and needs to have a demat account and a broker’s account. Each
investor will be given a login account and a password in the broker’s site. Investors can
log in and lace orders anytime that will be sent to exchange and will be compared with all
the orders and executed as per the prices.

21
 In this linear chain of investor-broker-exchange channel, there are two more
important players, viz, depositories and banks. Depositories (DP) handle the holding and
selling of demat securities. All brokers are embers and account holders of DPs. The
depositories function in liaison with the stock exchange and act as an online store for
shares and stocks. The transaction of cash is taken care of by banks. The investor’s
money is transferred to the account with the broker and used for transactions, and
similarly, the credits for the investor can be directly to the investor’s bank account.
The whole mechanism is interconnected and the speed of transaction depends on how
well all these components operate in harmony with each other. The technology used for
interlinking these components and the security issues play a major role in the speed of
transactions. When these issues are addressed, the transactions can be executed in real-
time (T+0), instead of the present T+2 days time period.

22
 BUY TRANSACTION (TABLE-1)

CUSTOMER APPROACH THROUGH PHONE/INTERNET

KIOSK

Funds
transferred
Broker buys 100 xyz @ market rate

Hold
Rs.30,
000
Yes, hold
DP server
Bank server

Order accepted and

goes to exchange
Share
transferred

NSE Trade done

23
 SELL TRANSACTION (TABLE-2)

CUSTOMER APPROACH THROUGH PHONE/INTERNET KIOSK

BROKER SELLS 100 XYZ @ Rs.300/-

Hold100
Funds Transferred xyz shares

Yes, Hold

Bank Server
DP server

Orders accepted and

goes to exchange

Trades done NSE Share transferred

24
 SETTLEMENT SYSTEM

The schedule of setting the trade Is governed by the stock exchange rules. The
following details are available in the depository software of the DP.

The pay in time decided by the stock exchanges for each settlement is
the NSDL deadline time. The significance of NSDL time is that securities can be moved
from the client account to the clearing account (client to clearing member), or from
clearing account to the stock exchange (clearing member to stock exchange) or from one
settlement to another (inter-settlement) only till the NSDL deadline of the relevant
settlement. Securities cannot be transferred to a settlement after the NSDL deadline for
that settlement is over.

No.of Transactions day Party with Activity

day Obligation

Day 1 T (if, Monday) Customer Trading

Day 2 T+1 (Tuesday) Customer Securities pay in to member

broker

Day 2 T+1 (Tuesday Customer Funds pay in to member broker

Day 3 T+2(Wednesday) Member Securities pay in to the stock

broker exchange

Day 3 T+2(Wednesday) Member Funds pay in to the stock

broker exchange

25
Day 3 T+2(Wednesday) Stock Payout of securities to member
exchange broker

Day 3 T+2(Wednesday) Stock Payout of monies to member

exchange broker

Day 4 T+3 (Thursday) Member Securities deposited into demat

broker account of customer

Day 4 T+3 (Thursday) Member Funds transferred into client’s

broker bank account.

26
 MAJOR ADVANTAGES OF ONLINE TRADING

With the February 2003 announcement of Gilts trading available online, capital
market reforms in India have outpaced all other sectors in the post-liberalization era. The
options available for investments today are many. The mutual funds industry is doing
well, IPO market is received and derivatives trading are catching on in India. If these
investments can be made by the click of the mouse then the investment process will be
the easiest. Investors can save time and make money. Online trading, which is the way the
developed world is investing, is now the mantra of investment markets in India. To
combine the speed of the internet and the intricacy of the trade and provide an interactive
and integrated trading environment for all investments is the ultimate goal.

• Online trading started in India in February 2000:

Online trading is of 2 categories: Discount online brokers and the other one is the
full service online broker. Discount online brokers allow one to trade via the internet
through the broker at reduced (less than offline brokerage charges) rates. Full service
online brokerage is linked to existing brokerage directly through the internet. These
brokers allow their clients to place online orders with the option of chatting to brokers if
advice is needed.

27
 FOR THE INVESTORS:

Online trading has created a new wave of changes among the investors because of
its convenience and the sense of empowerment attached with executing the trade on their
own If has also thrown in plenty of options to the investors in the form of various online
broking firms which provide a whole lot of advisory and counseling services. The biggest
advantages of online trading is the equitable treatment of investors, irrespective of small
or big, In terms of offering the service, making the information available and the benefits
of the stock trading were highly concentrated with a particular group of investors who
could afford the technical and advisory services. The stock market used to be a black box,
now it is open to all those who are willing and capable of investing because of the simple
and user friendly ways of online trading. In a nutshell,

• The internet made the stock market operations transparent.

• Cost of execution of trade for small quantities can be done in proportionate fractions
as that of big transactions.

• Data and information are their for everyone and available everywhere.

• Investors are empowered.

28
 FOR THE BROKERS:

Brokers can gain on two accounts.

• Surge in the volume of transactions will increase the profit even though the cost per
transaction is less in case of online trading.

• Marketing the investor accounts and transaction of demat securities has manifold
conveniences compared to the traditional method of transactions in physical securities.

ONLINE TRADING BENEFITS

Advent of online trading can shift the trading power from stock brokers to
individual investors. The e-trading concept ensures that the investor, howsoever small,
could be a more active participant in the decision rather than leaving his portfolio at the
sole discretion of his broker. Online trading provides.

BEST PRICE FOR INVESTORS:

Online trade offers the best price for the buying and selling transactions of the
investors, by ensuring proper matching of their orders within the communications
network itself. Also due to the high level of transparency with regard to display of
information the investors are able to get the best quote for the shares.

BROKERAGE IS THE LOWEST:

As the process of online trade is thoroughly automated the transaction costs are low,
also with competition among the online service providers the brokerage charges are at
their lowest in India.

LIQUIDITY TO THE INVESTORS:

29
 When online trade and online banking are available, liquidity of the investments are
very high as it is only a click away to disinvest and release the funds. Conversely, if the
investor spots some opportunity to invest, he could immediately allocate money from his
savings account and make his transactions.

TRANSPARENCY:
Online trading gives greater transparency to the investors by providing them an audit
trail. This involves a complete integrated electronic chain starting from order placement,
to clearing and settlement and finally ending with a credit to the depository account of the
investor. All these stages were subject to inspection, thus bringing in transparency into
the system.

HASSLE FREE TRADING:

Online trading integrates the bank, the brokerage firm and the stock accounts (demat
account) which lead to easy and paperless trading for the client.

QUICK TRADING:
The investor is able to execute the entire trading transaction, right from logging on
the broker’s site, to the execution and settlement of his bank account, in a very short
period of time.

LEVEL PLAYING FIELD:

Trading on the net, gives even the smallest retail investor access to information that
earlier was available only to the big traders. This provides a level playing field for all
investors In the securities market.

REDUCES THE SETTLEMENT RISK:

This method of trading reduces the settlement risk for the investor, as in this case no
short sale is possible, i.e., the seller will not be able to sell the securities unless he has
their actual possession. This reduces the settlement risk for the buyer. Who is assured of
the delivery of the securities.

30
 OUTCRY SYSTEM:
The broker has to buy or sell securities for which he has received the orders. For this,
the broker or his authorized representatives goes to the stock exchange. This method is
called the open outcry system. Basically the brokers shout while buying or selling the
securities. The floor of the stock exchange is divided into a number of markets also
known as ‘post pit’ or wing based on particular securities dealt there.

In the post pit or wing, the broker using ‘open outcry’ method makes an offer or bid
price. For making the necessary bargain, he quotes his purchase or sale price, also known
as offer or bid price. The dealer, to whom the price is quoted, quotes his own price when
the quotation of the dealer suits the broker, he may loose the bargain. If he is not satisfied
with the quote price, he may turn to some other dealer. On the close of the bargain, the
dealer as well as the broker makes a brief note of the particulars of the deal. Such notes
are made on some pad and on it the number of shares, the price agreed upon, the name of
the party, what membership number etc., are noted.

31
DISADVANTAGES OF OUTCRY SYSTEM:

• It lacks transparency.
• The scope of manipulation, speculation and mal practice is more.
• Signal were more important in the outcry system any member who could not interpret
the buy/sell signal correctly often landed himself in disaster situation.
• In audibility was another disadvantage of the outcry system.
• Due to the above disadvantages of the outcry system the ITI Financial Servicees
Limited has shifted from outcry system to online trading.

MANUAL TRADING

Trading procedure before introduction of online trading

Trading on stock exchanges is officially done in the trading ring. In the trading
ring the space is provided for specified and non-specified sections, the members and their
authorized assistants have to wear a badge or carry with them an identity card given by
the exchange to enter the trading ring. They carry a sauda book or confirmation memos,
duly authorized by the exchange and carry a pen with them. The stock exchanges
operations are floor level are technical in nature .Non-members are not permitted to enter
in to stock market. Hence various stages have to be completed in executing a transaction
at a stock exchange .The steps involved in this method of trading have given below:

Choice of broker:

32
 The prospective investor who wants to buy shares or the investors, who wants to sell
shares and transact business, have to act through member brokers only. They can also
appoint their bankers for this purpose as per the present regulations.

Placement of order:

The next step is the placing order for the purchase or sale of securities with a broker.
The order is usually placed by telegram, telephone, letter, fax etc or in person. To avoid
delay, it is placed generally over the phone. The orders may take any one of the forms
such as At Best Orders, Limit Order, Immediate or Cancel Order, Limited Discretionary
Order, and Open Order, Stop Loss Order.

Execution of order or contract:

Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special one-hour session on Saturday.
The members or the authorized assistants have to wear a badge given by the exchange to
enter into the trading ring. They carry a sauda Block Book or conformation memos,
which are duly authorized by the exchange when the deal is struck; both broker and
jobber make a note in their sauda block books. From the sauda book, the contract notes
are drawn up and posted to the client. A contract note is written agreement between the
broker and his clients for the transaction executed.

Drawing Up and Bills:

Both sale and purchase bills are prepared along with the contract note and it is posted
on the same day or the next day. This in a purchase transaction, once the shares are
delivered to the client effects payment for the purchases and pays the stamp fees for
transfer, a bill is made out giving the total cost of purchase, including other expenses
incurred by the broker in the price itself. With this, the process ends.

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 DEMATERLIZATION:

Dematerialization is the process by which physical certificates of an investor

are converted to an equipment number of securities in electronic from and credited in the
investor account with his DP. In order to dematerialize the certificates, an investor has to
first open an account with a DP and then request for the Dematerialization Request Form,
which is DP and submit the same along with the share certificates. The investor has to
ensure that he marks “Submitted for Dematerialization” on the certificates before the
shares are handed over to the DP for demat. Dematerialization can only be done to those
certificates, which are already registered in your name and belong to the list of securities
admitted for Dematerialization at NSDL.

Most of the active scrip’s in the market including all the scrip’s of S&P CNX
NIFTY and BSE SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets the option
to dematerialize such shares. Investor’s willing to exercise this option sends a Demat
request along with the option letter sent by the company to his DP. The company or its
R&T agent would confirm the Demat request on its receipt from the DP to reduce risk of
loss in transit.

Dematerialized shares do not have any distinctive or certificate numbers. These

shares are fungible-which means that 100 shares of a security are the same as any other
100 shares of the security. Odd lot shares certificates can also be dematerialized.
Dematerialization normally takes about fifteen to thirty days. To get back dematerialized
securities in the physical form, request DP for Rematerialization of the same is made.

34
 Benefits of Demat:

• It reduces the risk of bad deliveries, in turn saving the cost and wastage of time
associated with follow up for rectification. This has lead to reduction in brokerage to the
extent of 0.5% by quite a few brokerage firms.

• In case of transfer of electronic shares, you save 0.5% in stamp duty. You avoid
the cost of courier / notarization.

• You can receive your bonuses and rights issues into your DA as a direct credit,
this eliminating risk of loss in transit.

• You can also expect a lower interest charge for loans taken against Demat shares
as compared to loans against physical shares.

• There is no lost in transit, thus the overheads of getting a duplicate copy in such
circumstances is reduced.

• RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical securities.

35
 DEMAT ACCOUNT

What is Demat account and why it is required?

Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed
by the Government of India in 1992 with its head office at Mumbai. Its one of the function is
helping the business in stock exchanges and any other securities markets. Demat (short form
of Dematerialization) is the process by which an investor can get stocks (also called as
physical certificates) converted into electronic form maintained in an account with the
Depository Participant (DP).

DP could be organizations involved in the business of providing financial services

like banks, brokers, financial institutions etc. DP’s are like agents of Depository.

Depository is an organization responsible to maintain investor's securities (securities

can be stocks or any other form of investments) in the electronic form. In India there are two
such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central
Depository Services India Ltd.)

Investor’s wishing to open Demat account has to go DP and open the account.
Opening the Demat account is as simple as opening the bank account with any bank. As we
need bank account to save our money, make cheque payments etc, likewise we need to open a
demat account if we want to buy or sell stocks. All stocks what we possess will show in our
demat account. So we don't have to possess any physical certificates. They are all held
electronically in our demat account. As we buy and sell the stocks, accordingly our stocks
will get adjusted in our account.

36
Is a demat account must?

The market regulator, the Securities and Exchange Board of India (SEBI), has made it
compulsory to open the demat account if you want to buy and sell stocks.
So a demat account is a must for trading and investing.

How to start to open a Demat account?

We have to approach a DP to open a Demat account. Most banks are DP participants

so we may approach them.

A broker and a DP are two different people. A broker is a member of the stock
exchange, who buys and sells stocks on his behalf and also on behalf of his customers.

Following are the documents required to open Demat account.

When we approach any DP, we will be guided through the formalities of opening an
account. The DP will ask to provide some documents as proof of our identity and address.
Below is a list but we may not require all of them.
PAN card, Voter's ID, Passport, Ration card, Driver’s license, Photo credit card
Employee ID card, IT returns, Electricity/ Landline phone bill etc.

Do we need any stocks to open a Demat account?

No. We need not need any stocks to open a demat account. A demat account can be
opened with no balance of stocks. And there is no minimum balance to be maintained either.
You can have a zero balance in your account.

37
How much it cost to open a Demat account?

The charges for account opening, annual account maintenance fees and transaction
charges vary between various DP’s.
Finally – After successfully opening the demat account, the DP will allot “Beneficial Owner
Identification” Number, which will be needed to mention for all our future transactions.

If we want to sell our stocks, we need to place an order with our broker and give a
'Delivery Instruction' to your DP. The DP will debit our account with the number of stocks
sold. We will receive the payment from our broker.

If we want to buy stocks, inform our broker about our Depository Account Number,
so that the stocks bought are credited into our account.
Points to remember while opening online account

a) Make multiple enquiries and try getting low brokerage trading and dematting account.

b) Also discuss about the margin they provide for day trading.

c) Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer
from our bank account to trading account and visa versa. Some online share trading account
has integrated savings account which makes easy for us to transfer funds from our saving
account to trading account.

d) Very important is about service they provide, the research calls, intraday or daily trading
tips.

e) Also enquire about their services charges and any other hidden charges if any.

f) And also see how reliable and easy is to contact them in case if any emergency.

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 INDUSTRY PROFILE
Following diagram gives the structure of Indian Financial System:

39
FINANCIAL MARKET

Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities for buying
and selling of financial claims and services. The financial markets match the demands of
investment with the supply of capital from various sources.

According to functional basis financial markets are classified into two types.
They are:

 Money markets (short-term)

 Capital markets (long-term)
According to institutional basis again classified in to two types. They are
 Organized financial market
 Non-organized financial market.

The organized market comprises of official market represented by recognized

institutions, bank and government (SEBI) registered/controlled activities and
intermediaries. The unorganized market is composed of indigenous bankers,
moneylenders, individual professional and non-professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

Again the money market is classified in to

 Inter bank call money market

 Bill market and
 Bank loan market Etc.
 E.g.; treasury bills, commercial papers, CD's etc.

40
CAPITAL MARKET:

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are

 Primary market and

 Secondary market.
E.g.: Shares, Debentures, and Loans etc.

PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for
mobilization of resources by the companies and government undertakings, for new
projects as also for expansion, modernization, addition, diversification and up gradation.
Primary market is also referred to as New Issue Market. Primary market operations
include new issues of shares by new and existing companies, further and right issues to
existing shareholders, public offers, and issue of debt instruments such as debentures,
bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India (SEBI
a government regulated authority).

Function:

The main services of the primary market are origination, underwriting, and
distribution. Origination deals with the origin of the new issue. Underwriting contract
make the shares predictable and remove the element of uncertainty in the subscription.
Distribution refers to the sale of securities to the investors.

41
The following are the market intermediaries associated with the market:

1. Merchant banker/book building lead manager

2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant.

Investors’ protection in the primary market:

To ensure healthy growth of primary market, the investing public should be protected.
The term investor protection has a wider meaning in the primary market. The principal
ingredients of investors’ protection are:

 Provision of all the relevant information

 Provision of accurate information and
 Transparent allotment procedures without any bias.

SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding securities are
traded in the secondary market, which is commonly known as stock market or stock
exchange. “The secondary market is a market where scrip’s are traded”. It is a
market place which provides liquidity to the scrip’s issued in the primary market. Thus,
the growth of secondary market depends on the primary market. More the number of
companies entering the primary market, the greater are the volume of trade at the
secondary market. Trading activities in the secondary market are done through the
recognized stock exchanges which are 23 in number including Over The Counter
Exchange of India (OTCE), National Stock Exchange of India and Interconnected Stock
Exchange of India.

42
 Secondary market operations involve buying and selling of securities on the stock
exchange through its members. The companies hitting the primary market are mandatory
to list their shares on one or more stock exchanges in India. Listing of scrip’s provides
liquidity and offers an opportunity to the investors to buy or sell the scrip’s.
The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange – buyers broker and sellers broker

2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.

STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government
and semi-govt bodies or other public bodies as also for shares and debentures issued by
the joint-stock companies. In the stock market, purchases and sales of shares are affected
in conditions of free competition. Government securities are traded outside the trading
ring in the form of over the counter sales or purchase. The bargains that are struck in the
trading ring by the members of the stock exchanges are at the fairest prices determined by
the basic laws of supply and demand.

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not, constituted
for the purpose of assisting, regulating or controlling the business of buying, selling or
dealing in securities.” The securities include:

 Shares of public company.

 Government securities,Bonds

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 History of Stock Exchanges:

The only stock exchanges operating in the 19th century were those of Mumbai
setup in 1875 and Ahmedabad set up in 1894. These were organized as voluntary non-
profit-marking associations of brokers to regulate and protect their interests. Before the
control on securities under the constitution in 1950, it was a state subject and the Bombay
securities contracts (control) act of 1925 used to regulate trading in securities. Under this
act, the Mumbai stock exchange was recognized in 1927 and Ahmedabad in 1937. During
the war boom, a number of stock exchanges were organized. Soon after it became a
central subject, central legislation was proposed and a committee headed by A.D.Gorwala
went into the bill for securities regulation. On the basis of the committee’s
recommendations and public discussion, the securities contract (regulation) act became
law in 1956.

Functions of Stock Exchanges:

Stock exchanges provide liquidity to the listed companies. By giving quotations to

the listed companies, they help trading and raise funds from the market. Over the hundred
and twenty years during which the stock exchanges have existed in this country and
through their medium, the central and state government have raised crores of rupees by
floating public loans. Municipal corporations, trust and local bodies have obtained from
the public their financial requirements, and industry, trade and commerce- the backbone
of the country’s economy-have secured capital of crores or rupees through the issue of
stocks, shares and debentures for financing their day-to-day activities, organizing new
ventures and completing projects of expansion, diversification and modernization. By
obtaining the listing and trading facilities, public investment is increased and companies

were able to raise more funds. The quoted companies with wide public interest
have enjoyed some benefits and assets valuation has become easier for tax and other
purposes.

44
Various Stock Exchanges in India:

At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Those are:

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange
Bhubaneshwar Stock Exchange Association
Calcutta Stock Exchange
Cochin Stock Exchange Ltd.
Coimbatore Stock Exchange
Delhi Stock Exchange Association
Guwahati Stock Exchange Ltd
Hyderabad Stock Exchange Ltd.
Jaipur Stock Exchange Ltd
Kanara Stock Exchange Ltd
Ludhiana Stock Exchange Association Ltd
Madras Stock Exchange
Madhya Pradesh Stock Exchange Ltd.
Magadh Stock Exchange Limited
Meerut Stock Exchange Ltd.
Mumbai Stock Exchange
National Stock Exchange of India
OTC Exchange of India
Pune Stock Exchange
Uttar Pradesh Stock Exchange Association
Vadodara Stock Exchange Ltd.

45
Out of these major stock exchanges were:

NSE(NATIONAL STOCK EXCHANGE):

The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FI’s) to provide access
to investors from all across the country on an equal footing. Based on the
recommendations, NSE was promoted by leading Financial Institutions at the behest of
the Government of India and was incorporated in November 1992 as a tax-paying
company unlike other stock exchanges in the country. On its recognition as a stock
exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE
commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The
Capital Market (Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000 NSE's mission is setting the
agenda for change in the securities markets in India. The NSE was set-up with the main
objectives of:

• Establishing a nation-wide trading facility for equities and debt instruments.

• Ensuring equal access to investors all over the country through an appropriate
communication network.
• Providing a fair, efficient and transparent securities market to investors using
electronic trading systems.
• Enabling shorter settlement cycles and book entry settlements systems, and
• Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology, have become
industry benchmarks and are being emulated by other market participants. NSE is more
than a mere market facilitator. It's that force which is guiding the industry towards new
horizons and greater opportunities.

46
BSE(BOMBAY STOCK EXCHANGE):

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875
as "The Native Share and Stock Brokers Association". It is the oldest one in Asia,
even older than the Tokyo Stock Exchange, which was established in 1878. It is a
voluntary non-profit making Association of Persons (AOP) and is currently engaged in
the process of converting itself into demutualised and corporate entity. It has evolved over
the years into its present status as the premier Stock Exchange in the country. It is the first
Stock Exchange in the Country to have obtained permanent recognition in 1956 from the
Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while
providing an efficient and transparent market for trading in securities, debt and
derivatives upholds the interests of the investors and ensures redresses of their grievances
whether against the companies or its own member-brokers. It also strives to educate and
enlighten the investors by conducting investor education programmers and making
available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies
and regulates the affairs of the Exchange. The Governing Board consists of 9 elected
directors, who are from the broking community (one third of them retire ever year by
rotation), three SEBI nominees, six public representatives and an Executive Director &
Chief Executive Officer and a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible for the day-to-
day administration of the Exchange and the Chief Operating Officer and other Heads of
Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to
constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing
Board has powers as an Appellate Authority, matters regarding annulment of transactions,
admission, continuance and suspension of member-brokers, declaration of a member-

47
broker as defaulter, norms, procedures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member-brokers to the Exchange, etc.

Regulatory Frame Work Of Stock Exchange

A comprehensive legal framework was provided by the “Securities

Contract Regulation Act, 1956” and “Securities Exchange Board of India 1952”. Three
tier regulatory structure comprising

 Ministry of finance
 The Securities And Exchange Board of India
 Governing bond

Members of the stock exchange:

The securities contract regulation act 1956 has provided uniform regulation
for the admission of members in the stock exchanges. The qualifications for becoming a
member of a recognized stock exchange are given below:

• The minimum age prescribed for the members is 21 years.

• He should be an Indian citizen.
• He should be neither a bankrupt nor compound with the creditors.
• He should not be convicted for fraud or dishonesty.
• He should not be engaged in any other business connected with a company.
• He should not be a defaulter of any other stock exchange.
• The minimum required education is a pass in 12th standard examination.

48
STOCK EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a resolution
of government of India. It was later made statutory body by the SEBI act 1992.according
to this act, the SEBI shall constitute of a chairman and four other members appointed by
the central government.

With the coming into effect of the securities and exchange board of India act, 1992
some of the powers and functions exercised by the central government, in respect of the
regulation of stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

• To protect the interest of investors in securities.

• Regulating the business in stock exchanges and any other securities market.

• Registering and regulating the working of intermediaries associated with

securities market as well as working of mutual funds.

• Promoting and regulating self-regulatory organizations.

• Prohibiting insider trading in securities.

• Regulating substantial acquisition of shares and take over of companies.

• Performing such functions and exercising such powers under the provisions of
capital issues (control) act, 1947and the securities to it by the central government.

49
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK
EXCHANGES):

• Board of Directors of Stock Exchange has to be reconstituted so as to include non-

members, public representatives and government representatives to the extent of 50% of
total number of members.

• Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.

• All recognized stock exchanges will have to inform about transactions within 24 hrs.

50
TYPES OF ORDERS:

Buy and sell orders placed with members of the stock exchange by the investors. The
orders are of different types.

Limit orders:
Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at Rs.50.’Here, the
order has clearly indicated the price at which it has to be bought and the investor is not
willing to give more than Rs.50.

Best rate order:

Here, the buyer or seller gives the freedom to the broker to execute the order at the
best possible rate quoted on the particular date for buying. It may be lowest rate for
buying and highest rate for selling.

Discretionary order:
The investor gives the range of price for purchase and sale. The broker can use his
discretion to buy within the specified limit. Generally the approximation price is fixed.
The order stands as this “buy BRC 100 shares around Rs.40”.

Stop loss order:

The orders are given to limit the loss due to unfavorable price movement in the
market. A particular limit is given for waiting. If the price falls below the limit, the broker

51
is authorized to sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop
loss at Rs.22.

Buying and selling shares:

To buy and sell the shares the investor has to locate register broker or sub broker who
render prompt and efficient service to him. The order to buy or sell specifying the number
of shares of the company of investors’ choice is placed with the broker. The order may be
of any type. After receiving the order the broker tries to execute the order in his computer
terminal. Once matching order is found, the order is executed. The broker then delivers
the contract note to the investor. It gives the details regarding the name of the company,
number of shares bought, price, brokerage, and the date of delivery of share. In this
physical trading form, once the broker gets the share certificate through the clearing
houses he delivers the share certificate along with transfer deed to the investor. The
investor has to fill the transfer deed and stamp it. The stamp duty is one of the percentage
considerations, the investor should lodge the share certificate and transfer deed to the
register or transfer agent of the company. If it is bought in the DEMAT form, the broker
has to give a matching instruction to his depository participant to transfer shares bought to
the investors account. The investor should be account holder in any of the depository
participant. In the case of sale of shares on receiving payment from the purchasing broker,
the broker effects the payment to the investor.

Share groups:

The scrips traded on the BSE have been classified into ‘A’,’B1’,’B2’,’C’,’F’ and ‘Z’
groups. The ‘A’ group represents those, which are in the carry forward system. The ‘F’
group represents the debt market segment (fixed income securities). The Z group scrips
are of the blacklisted companies. The ‘C’ group covers the odd lot securities in ‘A’,
‘B1’&’B2’ groups.

ROLLING SETTLEMENT SYSTEM:

52
 Under rolling settlement system, the settlement takes place n days (usually 1, 2, 3
or 5days) after the trading day. The shares bought and sold are paid in for n days after the
trading day of the particular transaction. Share settlement is likely to be completed much
sooner after the transaction than under the fixed settlement system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days after
the trading day. A rolling period which offers a large number of days negates the
advantages of the system. Generally longer settlement periods are shortened gradually.

SEBI made RS compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory demat list and had daily turnover of about Rs.1 crore
or more. Then it was extended to “A” stocks in Modified Carry Forward Scheme,
Automated Lending and Borrowing Mechanism (ALBM) and Borrowing and lending
Securities Scheme (BELSS) with effect from Dec 31, 2001.

SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling
settlement experience it was further reduced to T+2 to reduce the risk in the market and to
protect the interest of the investors from 1st April 2003.

Activities on T+1:
Conformation of the institutional trades by the custodian is sent to the stock exchange
by 11.00 am. A provision of an exception window would be available for late
confirmation. The time limit and the additional changes for the exception window are
dedicated by the exchange.
The exchanges/clearing house/ clearing corporation would process and download the
obligation files to the broker’s terminals late by 1.30 p.m on T+1. Depository participants
accept the instructions for pay in securities by investors in physical form upto 4 p.m and
in electronic form upto 6 p.m. the depositories accept from other DPs till 8p.m for same
day processing.

Activities on T+2:
The depository permits the download of the paying in files of securities and funds till
10.30 am on T+2 from the brokers’ pool accounts. The depository processes the pay in
requests and transfers the consolidated pay in files to clearing House/clearing Corporation

53
 by 11.00am/on T+2. The exchange/clearing house/clearing corporation executes the pay-
out of securities and funds latest by 1.30 p.m on T+2 to the depositories and clearing
banks. In the demat mode net basis settlement is allowed. The buy and sale positions in
the same scrip can be settled and net quantity has to be settled.

COMPANY PROFILE

ABOUT THE ORGANISATION

ITIFSL is emerging as one of the top most wealth management companies in India
with a daily turnover of over 200 crores and 116 branches spread all over the country.
ITIFSL, originally promoted by the Investment Trust of India, is now a part of the Sharyans
and Inga Group. The Sharyans Group has an impressive portfolio of businesses under its fold
which mainly fall under the real estate and financial services categories. The prominent
subsidiaries of this Group are Prebone Yamane (Country’s largest debt broking company),
Intime Spectrum (India’s largest Registry & Transfer Agents), and Collin Stewarts India
Private Limited (Portfolio Management Services & Research along with institutional broking
operations for Collin Stewarts which is the largest wealth management company in the UK).
Under the guidance of the Sharyans and Inga Group, ITIFSL will soon touch the pinnacles of
success in the financial services industry by being a dominant force in the broking as well as
the distribution arena. With an unblemished and reputed track record, ITIFSL is all set
become an imposing wealth management firm in the country by giving the best to its clients
as well as stakeholders.

ITI FSL has been set up to engage in

• Stock Broking
• Institutional Broking
• Derivatives
• Depository Services
• Distribution of Investment Products
• Distribution of Insurance
• Commodities Broking

54
 Headquartered in Chennai, ITI FSL has a growing network of offices across several states
to ensure easy accessibility to our clients wherever they are. ITIFSL has over 116 Branch
Offices spread across the country to offer better reach and service to the investor. The

company currently marks its presence in the following regions:

• Andhra Pradesh

• Delhi

• Karnataka

• Maharashtra

• Madhya Pradesh

• Tamil Nadu

• West Bengal

Mission:

ITI FSL's mission is to deliver value with commitment. Emerging as one of the front-
line Brokerage Houses and a dominant force in the Distribution arena, we are continuously
engaged in the assessment of market conditions to balance risk and reward so as to optimize
returns to our investors.

Vision:

"To be the most Preferred Financial Advisor, Creator, Wealth Manager and to deliver the
Highest Standards of Service to customers and be Prominent in the horde of Finance
Companies offering similar services".

55
 Why ITIFSL?

• ITIFSL’s services are offered under total confidentiality and integrity with the sole
purpose of maximizing returns for their clients.

• Equity Broking - Corporate Member of The Stock Exchange, Mumbai (BSE) and
National Stock Exchange of India Ltd. (NSE).

• Pan India reach - 380 terminals spread across 75 different locations, in semi urban, urban
and metropolitan areas.

• More than 100,000 retail clients serviced from the above locations.

• ITIFSL have heavily invested in technology (customized and ready to use software)
involving front and back end operations offering seamless process and flawless execution
and raising our service levels.

• ITIFSL operate on an alert and well-defined system in risk management and settlement
mechanism.

56
OFFERINGS

57
 ADVANTAGES TO INVESTERS

Why you need a Financial Planner?

The financial planner is someone who can help you invest across investment avenues
based on your risk profile and investment objectives. Post-investment, he monitors your
investments and ensures that you are on course to achieve your investment objectives. If
necessary, he suggests changes to your financial plan so that you are able to achieve your
investment objectives as planned.Given the critical inputs provided by the financial planner
in helping you achieve your financial goals, it is important that you select the right financial
planner. Here are the reasons why ITI is the right planner for you…

Certification/Membership

More than anything else, this is a pre-requisite from the compliance point of view.
Your financial planner should be certified and registered as a broker or mutual fund agent
with NSE, BSE, AMFI etc. ITI FSL has Trading and Clearing Memberships with major
Stock Exchanges in India to offer broking services across market segments at all of the
National-level Exchanges. ITI FSL is a Depository Participant with CDSL. We also have
memberships with commodity exchanges. We have AMFI certified professionals to advice
you on mutual funds.

Competence

Gone are the days when financial planning simply required delivering application
forms. The traditional "one-size fits all" approach is passé.

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 With the increasing list of investment avenues on offer, selecting the one that suits you
the best is becoming a challenge. To that end, competence and skill set are the basic criteria
that investors should look for in an investment planner.

With ITI fine staff of professionals, you can be sure that you will get the best advice and
service to achieve your financial goals. Furthermore, the recommendations offered by ITI are
backed by solid research.

Value-add services

In addition to financial planning, ITI provides related, value-add services that can assist
you in the investment process. On-line tools and calculators are some of our more popular
value-add services. These tools can help you keep track of your investments. These value-add
services form an integral part of our offering.

One-stop shop

Every individual has different needs and the same undergo a change over a period of
time. The financial planner should be capable enough to understand these needs and offer
suitable products to fulfill them. For this purpose, ITI provides you with the entire range of
investment products from stocks, mutual funds, bonds to fixed deposits. In other words, we
offer a "one-stop" solution for all your investment needs.

Accessibility

One of the common complaints from investors is that their financial planner is
unavailable/inaccessible and therefore unable to provide adequate/prompt service. This is
particularly common in a one-man setup where the financial planner's services begin and end
with him, with little or no backup.

If the financial planner is preoccupied with some important clients or if he re-locates, it

59
leaves you in a soup because your financial plan is in limbo. It is best to go with a financial
planning initiative that is run by teams (as opposed to one-man setups) to ensure continuity of
your financial plan. ITI has a team of professionals who are ever ready to serve you at any
point of time. We are spread across the country so that you can have access to us always.

PRODUCTS AND SERVICES

We are a one-stop financial services shop, most respected for quality of its advice,
personalized service and cutting-edge technology.

Equities

ITIFSL provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist
prior to ITIFSL. ITI leveraged technology to bring the convenience of trading to the
investor’s location of preference (residence or office) through computerized access.
ITIFSL made it possible for clients to view transaction costs and ledger updates in real
time.

PMS

Our Portfolio Management Service is a product wherein an equity investment

portfolio is created to suit the investment objectives of a client. We at ITI FSL invest
your resources into stocks from different sectors, depending on your risk-return profile.
This service is particularly advisable for investors who cannot afford to give time or don't
have that expertise for day-to-day management of their equity portfolio.

Research

Sound investment decisions depend upon reliable fundamental data and stock
selection techniques. ITIFSL Equity Research is proud of its reputation for, and we want
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you to find the facts that you need. Equity investment professionals routinely use our
research and models as integral tools in their work. They choose Ford Equity Research
when they can clear your doubts.

Commodities

ITIFSL’s extension into commodities trading reconciles its strategic intent to

emerge as a one-stop solutions financial intermediary. Its experience in securities broking
has empowered it with requisite skills and technologies. The Company’s commodities
business provides a contra-cyclical alternative to equities broking. The company was
among the first to offer the facility of commodities trading in India’s young commodities
market (the MCX commenced operations only in 2003). Average monthly turnover on the
commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities
market has several products with different and non-correlated cycles. On the whole, the
business is fairly insulated against cyclical gyrations in the business.

Invest Online

ITIFSL has made investing in Mutual funds and primary market so effortless. All
you have to do is register with us and that’s all. No paperwork no queues and No
registration charges.

INVEST IN Mutual Fund

ITIFSL offers you a host of mutual fund choices under one roof, backed by
in-depth research and advice from research house and tools configured as investor
friendly.

APPLY IN IPOs

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 You could also invest in Initial Public Offers (IPO’s) online without going through
the hassles of filling ANY application form/ paperwork

Stay connected to the market:

The trader of today, you are constantly on the move. But how do you stay
connected to the market while on the move? Simple, subscribe to ITIFSL Stock
Messaging Service and get Market on your Mobile!

Insurance

An entry into this segment helped complete the client’s product basket;
concurrently, it graduated the Company into a one-stop retail financial solutions provider.
To ensure maximum reach to customers across India, we have employed a multi pronged
approach and reach out to customers via our Network, Direct and Affiliate channels.
Following the opening of the sector in 1999-2000, a number of private sector insurance
service providers commenced operations aggressively and helped grow the market. The
company’s entry into the insurance sector de-risked the company from a predominant
dependence on broking and equity-linked revenues. The annuity based income generated
from insurance intermediation result in solid core revenues across the tenure of the
policy.

Wealth Management Service

Imagine a financial firm with the heart and soul of a two-person organization. A
world-leading wealth management company that sits down with you to understand your
needs and goals. We offer you a dedicated group for giving you the most personal
attentionat every level.

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Roles and Responcibilities in Organisation:

We will give updates to customers in

 Economic Outlook and Updates

 Sector & Company Reports

 Technical Recommendations

 Daily Market Report

 Daily Technical Outlook

 Reports on New Fund Offerings

 Weekly analysis of mutual funds – Fund Focus

 Weekly debt report: Debt Dose

 Offer daily technical calls through SMS to our clients

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KEY LEARNINGS IN ORGANISATION:

 EQUITY

 MUTUAL FUNDS

 TAX SAVENGS SCHEMES IN MUTUAL FUNDS

 ONLINE AND OFFLINE TRADING

 IPO (INITIAL PUBLIC OFFER)

 DERIVATIVES

 FOREX MARKET

 COMMODITIES

 RISK-RETURN PROFILE IN FUTURES AND OPTIONS-S&P CNX NIFTY

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 ANALYSIS OF THE STUDY

Most of the Stock trading companies charge a fixed amount per Rs.100.

ITI Financial Services Ltd

The company charges Rs.0.03% for Intraday and Rs.0.30% for delivery
based transactions.

For Intraday based transactions

Transaction value Rs.100000
Deduct
Brokerage (0.03%) 30
Service Tax (10.2% on brokerage) 3.0
STT (security transaction tax)
0.125% on transaction value 125
---------------
Rs.99842.0
---------------
For Delivery based transactions
Transaction value Rs.100000
Deduct
Brokerage (0.30%) 300
Service Tax (10.2% on brokerage) 30.6
STT (security transaction tax)
0.25% on transaction value 250
---------------
Rs.99419.4

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India Infoline Ltd

The company charges Rs.0.05% for Intraday and Rs.0.40% for delivery
based transactions

For Intraday based transactions

Transaction value Rs.100000

Deduct
Brokerage (0.05%) 50
Service Tax (10.2% on brokerage) 5.1
STT (security transaction tax)
0.125% on transaction value 125
---------------
Rs.99819.9
----------------

For Delivery based transactions

Transaction value Rs.100000
Deduct
Brokerage (0.40%) 400
Service Tax (10.2% on brokerage) 40.8
STT (security transaction tax)
0.25% on transaction value 250
---------------
Rs.99309.2
---------------

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Share Khan Ltd

The company charges Rs.0.6% for Intraday and Rs.0.5% for delivery
based transactions

For Intraday based transactions

Transaction value Rs.100000

Deduct
Brokerage (0.1%) 60
Service Tax (10.2% on brokerage) 6.12
STT (security transaction tax)
0.125% on transaction value 125
---------------
Rs.99808.8
---------------

For Delivery based transactions

Transaction value Rs.100000

Deduct
Brokerage (0.5%) 500
Service Tax (10.2% on brokerage) 51
STT (security transaction tax)
0.25% on transaction value 250
---------------
Rs.99199
----------------

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 For Intraday

Particulars ITIFSL Ltd India nfoline Ltd Share Khan Ltd

Transaction value 100000 100000 100000
Brokerage 30 50 60
Service Tax 3.0 5.1 6.12
STT 125 125 125

Net Amount 99842.0 99819.9 99808.8

Interpretation:

Though the transaction value is same for ITIFSL, India Infoline &
Share Khan, but the net amount benefited to the customer is obtained from

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 ITIFSL. The reason, the brokerage charges are less. Also it is to be noted
that the service tax is charged on brokerage amount.

For Delivery

Particulars ITIFSL Ltd India Infoline Ltd Share Khan Ltd

Transaction value 100000 100000 100000
Brokerage 300 400 500
Service Tax 30.6 40.8 51.0
STT 250 250 250
Net Amount 99419.4 99309.2 99199.0

Interpretation:

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 Though the transaction value is same for ITIFSL, India Infoline &
Share Khan, but the net amount benefited to the customer is obtained from
ITIFSL. The reason, the brokerage charges are less. Also it is to be noted
that the service tax is charged on brokerage amount.

ONLINE TRADING MECHANISM

F1
Key is used for the buying of shares and to display the order entry table .
For eg:- Bse/Nse
Company code
Symbol
Total quantity
Price

F2
Key is used for selling the shares and to display order entry.

F3
Key is used to display the pending entry
eg:- If we order for shares and it will not be traded by Nse/Bse. Then the shares
are known as in pending.

F4
Key is used for market watch

F5&F6

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 Key is used for market picture of a particular company if we enter some particular
company name in the market picture. It will show the best five buyers of that particular
and best five seller of that particular company. Always the five buyers /sellers will not be
same they will change with in seconds.

Buyer Seller
No.of Quantity Price Price Quantity No.of
Orders of shares of shares orders
And we can see .

Opening/yesterday closing price of the shares.

High /low rate of the shares.

% of changes in particular company.

Last traded quantity and rate will be shown.

Shift F7
To know the details of a particular company
Eg:- Reliance:-symbol, company code, dividend details

F8 & F9
This keys are used to show all the executed order.
Eg:-which are already traded in the market picture

F10
Key is used for message log
At what time particular company shares were traded, particular trade, particular time.

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 F11
To add script to the screens

F12
Key is used for market movement for particular script or share.

FINDINGS OF THE STUDY

 The intraday net amount (99842.0) is highest for ITIFSL when compared to India Infoline

Ltd & Share Khan Ltd.

 The net amount for delivery based transactions(99419.4) is highest for ITIFSL followed by

India Infoline Ltd & Share Khan Ltd

 It was found that most of the customers are willing to take Demat Account rather than

commodity account.

 From the survey it is found that most of the customer’s satisfaction level is good with the

advice given by their marketing executives and the information given in the broachers.

 Most of the customers prefer to invest in long term investments.

 From the survey it is found that most of the customers are aware of online trading process

of ITI Financial Services Limited.

 Most of the customers are interested to take part in the demo sessions of online trading in

ITI Financial Services Limited.

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 SUGGESTIONS

 The competitors of ITIFinancial Services Limited Viz., India Infoline Ltd and Share

Khan Ltd should decrease the brokerage charges to attract the customers.

 Company should increase awareness about the company’s products & service offered by

them in the market.

 Company should maintain good relation with the customers and respond quickly to the

queries asked by the customers

 The company should give demonstration to customers so that they can get complete

knowledge about online trading.

 Company should try to minimize the rejections by taking care while filling the application

form.

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 The company should increase branch offices in Hyderabad & other areas in A.P.

CONCLUSION

New ideas are to be implemented to catch the customers. The strategy of giving
more benefits to the high end customers is very useful. All the positive points are used to
get the business for the firm.

But again if any one wants to take risk & earns a lot he can go for shares. Because
stock market is a volatile market. Anything & everything can happen to this market. But
then again if anyone study the market well he can earn a lot.

Again like every coin has its two sides, similarly every financial instrument has its
own features, its advantage & disadvantage. So finally it is the investor himself/herself
has to decide where to invest.

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Bibliography:

www.indianstockmarket.com
www.nseindia.com
www.bseindia.com
www.sebi.com
www.itifsl.co.in

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